Connect with us

Market Watch

The DeFi Boom Gives Rise To Ethereum: Why Bitcoin Should Be Worried

Published

on

Ethereum
Ethereum (Getty Images)

Bitcoin’s position as the number one cryptocurrency might be lost to Ethereum which has so far, been recording massive growth streaks in 2020.

With 261% value gained in 2020 as opposed to Bitcoin’s 65%, Ethereum is becoming more popular and profitable. Ethereum has also seen a surge in active address count. Its 118% count leaves Bitcoin’s 49% in the dust. In the words of Messari‘s Chief Executive, Ryan Selkis, “The level of development on Ethereum is crazy”. 

Ethereum’s “crazy” development, as Ryan puts it, has been driven largely by DeFi (decentralised finance). DeFi is a relatively new concept in the crypto world, and it has got everyone talking. DeFi is now arguably the most active sector in the blockchain base.

DeFi basically turns traditional financial instruments, such as loans and insurance funds, into peer to peer finance through decentralized technologies created on blockchain. 

READ ALSO: Hype-Driven Bubble: Big Correction Shows DeFi Tokens Are Overvalued

Majority of DeFi projects runs on the Ethereum blockchain because of its ability to execute smart contracts. DeFi technology eliminates the need for intermediaries in collateralized loans, accepting deposits and insurance.

With advantages such as these, a lot of people have been making good use of the technology. DeFi’s boom can be seen in terms of its total value locked (TVL). A lot of crypto has poured into the platform in 2020.

There has been a dramatic increase from $4.2 billion to $7.88 billion within August alone. 

The ethereum-based DeFi protocols have forced bitcoin owners to lock their bitcoin into smart contracts that in turn, give them Ethereum-based tokens.

According to research published by Messari, more than half a billion dollars worth of bitcoin has been sent to Ethereum in 2020. This accounts for 0.3% of bitcoin’s supply.

The value of Bitcoin on the Ethereum Blockchain (Glassnode)

Although Ethereum is racking up numbers, it is still way behind bitcoin in price. With a market cap of $45 billion, it’s still far from Bitcoin’s $221 billion. 

READ ALSO: Interested In Bitcoin And Ethereum? Now Might Be The Best Time To Invest Long Term

However, Bitcoin only started to take off in 2013, 4 years after its inception. That year, one bitcoin was traded at $13.50. Although the prices soared to around $1,079 towards the end of the year, it suffered quite a crash in 2014. As at January 2014, 5 years after its launch, Bitcoin’s market cap was $10 billion. 

In Ethereum’s 5 years of existence, it has gained a market cap four times what Bitcoin had when it was 5 years. Bitcoin might currently be ahead of Ethereum, but Ethereum seems to be closing that gap— and fast. 

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Bolu Abiodun is a recent graduate of Theatre and Media Arts, Federal University Oye-Ekiti. A journalist with over a year's experience on the job. A former editor at American Media company Project Forward, he is a skilled content creator, social media manager and digital marketer.

Continue Reading
Click to comment

Leave a comment:

Market Watch

Jack Dorsey‘s Square to develop open source Bitcoin mining

Published

on

Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

Learning Guides

Understanding Speculation and Crypto Volatility

Published

on

Everyone who dabbles in the crypto industry learns almost immediately that the market is very volatile and oftentimes things can change very quickly. That volatility is the fundamental reason why some investors make absolutely stunning gains in so short a time and others lose a lot of money as well. Trading in crypto is one of the riskiest ventures any person can undertake and as they say, it’s not for the faint of heart. The risks can be mitigated of course and sometimes depends specifically on the coin or crypto asset being traded on, barring general market trends.

Nevertheless, to get to the bottom of the volatility concept, one must understand speculation in the market. To start off, the concept of speculation isn’t limited to cryptocurrencies, on the contrary, speculation has existed for as long as economics and trading has. But it is worth saying that speculation is often a feature of novel sectors, assets, commodities and the like. So, even though cryptocurrencies have been around for more than a decade, they’re still in their infancy as far as markets go. One could say that the market is still trying to find its feet.

One of the fundamental reasons why cryptocurrencies are so volatile is that they are fundamentally backed by nothing of value outside the attention that they get. Unlike many fiat currencies which are either pegged to another currency’s value or whose value is unilaterally determined by a central authority, cryptocurrencies only derive value as a function of how many people are willing to use is to transact, i.e. trust in the asset because other people trust it. As a rule of thumb, the larger the number of people who accept the asset, the more valuable it becomes.

This is one of the hallmarks of speculative trading. In the crypto world or in any market that’s novel and untested, many people are in it to win it which means their strategies in trade has the objective of making as much profits as possible in the short term. Therefore, the market enters a subtly dangerous cycle of rapidly changing prices of assets. Basically, investors typically buy assets when prices are low and wait. As more investors are attracted to the commodity for its low prices, it sets off a cascade where more people buy in, causing the price to steadily rise. 

However, all good things must come to an end and it almost always gets to a breaking point whereupon the price gets high enough for investors to begin to sell. This reverses the earlier cascade and as more and more investors pull out, the prices can fall dramatically causing even more to sell off in fear of losing whatever investments they have left. The prices having fallen resets the game and primes investors to begin buying again.

Volatility has been one of the talking points of many critics of cryptocurrencies often comparing it to a Ponzi scheme. And in certain cases, persons of interest with large pulls and audiences can substantially affect the rate at which prices rise and fall. Other factors include government regulations. Volatility at its core reflects the often chaotic nature of trade and market interactions and human hopes and fears.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

Market Watch

What China’s crypto clampdown means for investors

Published

on

Over the weekend, China, the biggest crypto mining country once again, began to clamp down on cryptocurrency. Ten Chinese agencies including the central bank and banking, securities and foreign exchange regulators have vowed to work hand in hand to expose illegal cryptocurrency activity.

China has always placed stricter rules on cryptocurrencies but the new rule has made all crypto-related activities illegal. According to the People’s Bank of China (PBOC), it is illegal to cryptocurrency trading and anyone that does so will be severely punished; this includes those within China that are working for overseas platforms. To fully phase out the cryptocurrency mining sector, the National Development and Reform Council (NDRC) said that it would launch a nationwide crackdown on cryptocurrency.

Over the years, China does not recognize cryptocurrency as a legal tender. In 2013, the Chinese government referred to Bitcoin as a virtual commodity that individuals are allowed to freely participate in. This freedom, however, precludes banks and payment companies from providing services that are Bitcoin related.

In 2017, Initial Coin Offering (ICO) was banned. The ban was also extended to the conversion of legal tenders to cryptocurrencies by trading platforms which led most of the platforms to shut down operations in China. The crackdown led 88 trading platforms and 85 ICO platforms to withdraw from the market as of July 2018.

To China, the crackdown on cryptocurrency is necessary as the country is trying to launch its official digital currency and the need to fulfil its 2060 climate targets. The crackdown was necessary as cryptocurrency was seen as infringing on people’s properties and ‘disrupting the normal economic order.’

The statement by PBOC on Friday was unequivocal as the current crackdown is distinct from the previous ones. In his statement on Friday, PBOC called Bitcoin, Ether and Tether ‘legally irreparable’ and should not be used. The new regulations forbid financial institutions, marketing and IT providers from supporting crypto-related activities. The activities of both crypto holders and miners are now considered illegal. This is what Henri Arslanian, a PwC crypto leader termed as “No ambiguity. No room for discussion. No grey areas” in his tweet.  

What does this mean for crypto holders worldwide?

The major effect of China’s crackdown on cryptocurrency is the increase in price volatility. While volatility is a common phenomenon in the crypto world, a crackdown initiated by the world biggest cryptocurrency mining country will have a huge effect on market price.    

After the PBOC interview, Bitcoin fell by 4% within 24 hours and is currently trading at $43,320. Ethereum fell by 6% and it is currently trading at $3,036. With the Evergrande debt crisis and the huge blow bedevilling the crypto market, a clampdown by China would most likely keep the market price on the red until another good news crops up.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

TRENDING

%d bloggers like this: